Maintain short positions. Despite the bears taking profit near the resistance, the E-Mini Dow managed to progress higher, adding 125 pts to settle at 34,153 pts. It started Friday’s session flat at 34,028 pts. It initially moved sideways for most of the session until it found the day low at 34,017 pts. Strong bullish momentum emerged during the US trading session, bringing it to the 34,372-pt day high. However, the index failed to sustain the intraday gains, paring it to a 34,153-pt close – leaving a long upper shadow near the resistance level. If the E-Mini Dow retraces further in the coming sessions, we may see a new “lower high” bearish pattern. This will signify the correction movement that started since the Shooting Star remains under way, and the index will pull back to test the support levels. Conversely, an upward movement that clears the resistance level will form a fresh “higher high” pattern and put an end to the correction movement. Based on the latest price action, the bears are still dominating near the resistance level. Hence, we hold on to our negative trading bias.

Traders should maintain the short positions initiated at 34,183 pts, or the closing level of 11 May. For risk management purposes, the stop loss remains at 34,318 pts, or the closing level of 14 May.

The immediate support is formed at the 33,700-pt round number, followed by 13 May’s 33,200-pt low. On the upside, the immediate resistance is revised to 34,382 pts – 14 May’s high – and followed by 34,550 pts.

Source: RHB Securities Research - 24 May 2021